Indeed, companies like Uber and Lyft, which were expected to underpin the strong IPO market this year, aren’t under the same pressure. As long as the shutdown doesn’t drag out too long, they should be able to proceed with their plans this year.
Both ride-hailing companies have filed confidentially with the SEC for listings that would take place in March or April at the earliest. Still, the shutdown has interrupted the firms’ ability to get feedback from the SEC about their disclosures, a necessary first step toward completing a registration statement.
Lori Begley, managing director at BMO Capital Markets, said the firm is advising even companies that have gone through most of the regulatory-review process to hold off because of an inability to win final approval now. “With the SEC in partial shutdown, you can’t effectively price the transaction,” she said.
One small Chinese company, MMTec Inc., raised $7 million in an IPO on Nasdaq this week, but it was only able to do so because it completed its SEC registration before the shutdown. It is also possible that one or more shell companies known as special purpose acquisition companies, or SPACs, could start trading due to procedures that aren’t practical for typical companies going public.
Some lawyers said they are instructing clients to file confidentially with the SEC, which is still doable during the shutdown, so they will be ahead in the queue once the government reopens. It is unclear, though, how the SEC will prioritize its workload once employees return.
“There’s a lot of uncertainty around what happens when the government reopens,” said Mr. Denenberg of Davis Polk. “How does the SEC unbury itself and in what order?”
An SEC spokeswoman declined to comment.
The unexpected freeze puts Wall Street in a tough spot too. Banks’ capital-markets groups have already been suffering from a paucity of debt issuance in recent weeks as a result of the financial-market spasms.
Companies with below-investment-grade bond ratings haven’t sold any debt since November, and December was the first month since November 2008—the height of the financial crisis—without any junk-bond issuance, according to Dealogic. It isn’t much better in the investment-grade bond market, with 2019 marking the slowest start to a year for U.S. issuance since 2008 as of early Tuesday.
